Control over Public Finance | Daily News

Control over Public Finance

Continued from March 12 Part II

Article 43 of the Constitution states ‘there shall be a Cabinet of Ministers charged with the direction and control of the Government of the Republic, which shall be collectively responsible and answerable to Parliament’. The importance of this doctrine is that they work to prevent the executive arm of government acting irresponsibly. According to this principle, the legislative functions does not cease with the passage of a Bill. It is therefore only by monitoring the implementation process that members of the legislature uncover any defects and act to correct mis-intepretation and maladministration. In this sense the concept of oversight exists as an essential corollary to the law making process. As the saying goes, the executive runs the government the Parliament keeps the government honest.

Tools and mechanisms available to Parliament in carrying out its legislative oversight functions can be categorized as internal and external. Internal mechanisms include the Committee system, within the Chamber: debates, Parliamentary questions, confidence and censure. Asking of questions is an inherent and unfettered parliamentary right of Members. The most important mechanism for the control of the executive is the question time in Parliament. It originated in the Westminster system of the United Kingdom, but occurs in several other countries as well. Question time puts a government on trial by seeking information on anything. Every Minister whose turn it is to answer questions has to stand up and answer for his/ her acts of omission and commission and those of Ministry and departments under him/her.

Extra Parliamentary (External) tools include Supreme Audit Institutions, Ombudsman, Human Rights Commission, Anti-Corruption Agencies – Commission to Investigate allegation of Bribery and Corruption. (CIABOC) and Right to Information Law.

Oversight Committee System

It is a duty cast upon the Parliament which cannot be abdicated, to make subtle scrutiny of all expenses incurred out of Consolidated Fund and revenue of Government enterprises. This requirement is an essential part of democracy as the State is responsible to the people because they are funds belonging to the people but held State organs as trustee of them. Scrutiny of the public funds was not practically possible to be conducted in full the House. Therefore in 1860 British Prime Minister Gladstone introduced an oversight committee system which is being in operation quite successfully in almost all the democratic countries such as United Kingdom, India, Canada, United States, Australia, New Zealand etc. The oversight committee established for the scrutiny or public funds is called ‘Public Accounts and Estimates Committee’ in the United Kingdom.

The said committee consists of members representing all political parties represented in the Parliament and the tradition and inveterate practice adopted therein is to conduct their examinations / investigations with apolitical approach. It is also an established tradition that it is headed by a senior opposition member with high reputation and integrity. Such scrutiny becomes so relevant and important to prevent corruption, abuse of powers, inefficiency and to promote the productivity, accountability and transparency of the affairs of the State.

By virtue of powers vested in our Parliament by Articles 148-152 of the Constitution, the Parliament has made provisions to establish a Public Accounts Committee under the standing orders of the Parliament. After the adoption of the present Constitution the functions of the Public Accounts Committee divided into two oversight committees, Public Accounts Committee (PAC) and Committee on Public Enterprises (COPE). Public Accounts Committee is entrusted with the power to scrutinize all Ministries, Departments and Local Authorities. Committee on Public Enterprises is empowered to examine all Corporations, Boards, Authorities, State Banks and State owned companies. There are over 400 institutions which come within the scope of COPE.

Case Law

The failure to manage public funds with accountability and transparency by government organs would lead the country to a disastrous situation. Cited below are a few judgements where such management failures in Public Funds have been rectified to the thanks of the Supreme Court and all other public spirited persons involved in these cases.

• Sri Lankan government in 2003 decided to privatize three Government owned public transport services which facilitated the transportation in three Provinces namely Western, Central and Sabaragamuwa. The Government entered into an agreement with the approval of the Cabinet of Ministers. Several employees of the said companies sought to challenge the decision of the Government by way of Writ of Certiorari and moved to quash agreement. The Court of Appeal dismissed the application on technical grounds and the petitioners appealed to the Supreme Court against the decision of the Court of Appeal. It was argued in the Supreme Court that there was no procedural fairness in the transaction and much above that the bidders who purchased the companies had no creditworthiness to ensure their ability to provide an uninterrupted transports service to the general public. In the event the bidders failed to perform their obligations, the general public would have been in a serious dilemma without their basic facility of transportation. The Supreme Court took a bold step to exercise the inherent jurisdiction by converting the said application for special leave into an application for violation of fundamental rights and annulled the agreement as a result National Transport Board still remains in the said three Provinces.

• Another important related judgement is that of Ven. Thiniyawala Palitha Thera v A.H.M. Fowzie., Minister of Petroleum and Petroleum Resources Development (Petroleum Hedging case). Two cases were filed by way of public interests litigation challenging the validity of an oil hedging contract entered into by the government with a consortium of banks, on the basis that it was corrupt and adversely increased the oil price thereby causing severe hardships to general public of the country. It was alleged that the agreed price was excessive in terms of the prevailing price of the world oil market and the government shall not impose unreasonable fiscal levies considering the petroleum as an essential item for the people in day-to-day life. The Supreme Court was of the view that it was illegal and issued an interim order suspending further payment. The Court also directed the government to adhere to a particular price formula granting some concessions to consumers. It was an unprecedented incident whereas the government blatantly flawed and disregarded the Supreme Court order undermining the rule of law as well as the fundamental duties cast upon the government by the Constitution.

•Vasudeva Nanayakkara v K.N. Choksy was a case in which the petitioner invoked the fundamental rights jurisdiction of the Supreme Court in terms of Article 12(1), 17 and 126 of the Constitution to set aside or cancel the impugned sale of 90% of the shares owned by the Government in Sri Lanka Insurance Corporation to certain respondents. The said sale had taken place on April 11, 2003 purportedly on the basis that the sale had been approved by the Cabinet of Ministers. The 33rd respondent being the Chairman of Parliamentary Committee on Public Enterprises (COPE) has presented a report to the Parliament on 12.01.2007 exposing certain corruption and abuse of powers that took place in the process of the said transaction.

The petitioner had to invoke the fundamental right jurisdiction of the Supreme Court since the executive disregarded the recommendations made by the COPE despite the fact that they have been approved by the Parliament. Some respondents took up the position that the application was time barred. Petitioners’ argument was that the public had no access to the details of the said transaction and they were kept in the dark about such corruption and abuse of powers until the said COPE Report was published. Therefore the Supreme Court held that the time bar prescribed in the Constitution is not applicable to this application specially taking into consideration the nature of the application which is of public interest litigation. Amaratunge J. pronounced the judgement of the Supreme Court holding that the sale of the 90% shares owned by the government of Sri Lanka in Sri Lanka Insurance Corporation was patently flawed and amounts to a violation of the fundamental rights of the petitioner guaranteed by Article 12(1) the Constitution. As a result the Insurance Corporation was reverted to the State together with the controlling interest of several other institutions including the Apollo Hospital in Colombo.

Obstacles

Among other things COPE also has commented the reasons for such corruption, mismanagement, inefficiency and abuse of power as follows;

• Serious lapses and negligence on the part of the secretaries to respective ministries who are Chief Accounting Officers responsible to the Parliament.

• Lack of professionalism and quality management, failure on the part of the relevant Ministers and the Treasury to supervise the utilization of the funds.

• Political interferences and violation of financial regulations.

• Lack of effective internal audit.

• Lack of corporate plans and action plans.

Auditor General

The most important extra ordinary oversight mechanism is the Auditor General. He plays an important role in the oversight process, because parliament relies on his audited accounts to conduct its ex-post oversight.

A major change in regard to the responsibility of audit was introduced by the Donoughmore reforms of 1931. For the first time the Auditor General’s reporting responsibility was made to the legislature and not to the government of Britain. The Soulbury Constitution, 1946 and the first Republican Constitution of 1972 continued the status quo with regard to the responsibility of government audit. Under 1978 Constitution, although the Auditor General is appointed by the President he is answerable to Parliament and not to the government and is therefore independent of the Executive.

The responsibility of auditing all ministries, departments and other agencies of the government, public corporations and local authorities is contained in Article 154(1) of the Constitution and in standing order No 125 of Parliament. In respect of public owned enterprises, the responsibility is spelt out in the Finance Act No.38 of 1971 and in regard to accounts and private and commercial entities in the Companies Act of 2007. Under Financial Regulation 133 an Internal Audit Unit is established under the Head of Institutions. The 13th Amendment to the Constitution has recognized the central control of the public audit function to include provincial Council Audit too.

A new Legislation, National Audit Act No. 19 of 2018, has been passed in pursuance of the 19th Amendment to the Constitution in 2015. Section 2 of the Act states the applicable law pertaining to audits. Accordingly, the provisions enshrined in Articles 153, 153A, 153B, 153C, 153D, 153E, 153F, 153G, 153G, and 154 of the Constitution. The provisions of this Act and any other written law, as may be applicable, shall apply to audit and matters connected therewith.

Executive Presidency

It also necessary to place on record that the accountability and the responsibility of the legislature is severely eroded with the introduction of the Executive Presidency in 1978 Constitution. It had been a practice since 1994, (except in several years) the President herself/himself held the portfolio of the Ministry of Finance which having the powers to appoint and remove all members of the Cabinet. As a result, Ministers of Cabinet as well as Members of Parliament representing the ruling coalition Governments are suppressed and submerged and also sometimes under threat and prevented from making any contribution independently and constructively. Hence it is a timely need to reform the law that the President shall not hold the portfolio of the Minister of Finance.

Since the President is not a Member of the Parliament and makes all decisions on fiscal policies and financial allocations which are matters exclusively vested in the Parliament clearly shows a conflict of interests specifically he/ she being the Head of the Executive Government has encroached upon the authority of the legislature leading the economy sometimes towards a catastrophic dilemma. The mere fact that the Minister of Finance is not a Member of Parliament to answer any question raised by any Member in the House establishes the fact that there is a total dereliction of the powers vested in the legislature. The factual position is that the Executive President controls the legislature by submerging the doctrines of separation of powers and rule of law as well.

Reforms

Several reforms to our system may be suggested for the consideration of the authorities.

• Committees to have an Independent Secretariat with experts and professionals in various fields.

• The Committees Secretariat to work with close link to the Parliamentary Budgetary Office.

• Committees to have a data bank which should be periodically updated and people must have right to access to such information.

• Committees to have the power to examine and to scrutinize privatized organisations such as SriLankan Air Lines, (prior to March 2008) Sri Lanka Telecom, so long as Treasury holds, a substantial number of shares.

• Powers to oversight Committees to evaluate and make recommendation on budgetary allocation before the Appropriation Bill is presented.

• Adopting a procedure to commence pre-budgetary debates enabling to adjust or alter budgetary provisions after ascertaining views of the Members of the House and identifying the priorities.

• Reforms to the Declaration of Assets and Liabilities Law towards the proper implementation and elimination of corruption.

• Proper compliance with the provisions of the Fiscal Management (Responsibility) Act No.03 of 2003.

(The writer is an Attorney-at-Law)

Concluded 

 


 

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